Passionate about IP! Since June 2003 the IPKat has covered copyright, patent, trade mark, info-tech, privacy and confidentiality issues from a mainly UK and European perspective. The team is Eleonora Rosati, Annsley Merelle Ward, Neil J. Wilkof, and Merpel. Nicola Searle is currently on sabbatical. Read, post comments and participate! E-mail the Kats here

The team is joined by GuestKats Mirko Brüß, Rosie Burbidge, Nedim Malovic, Frantzeska Papadopolou, Mathilde Pavis, and Eibhlin Vardy

Tuesday, 31 May 2016

Merpel thought that nothing at the European Patent Office could surprise her any more. How wrong she was. She has now received news of a draft of the latest proposal from the EPO administration to reform the EPO Boards of Appeal. The background is given in her previous post, second and third headings.

As she wrote before, the previous proposals from the EPO President to the Administrative Council for the reform of the Boards of Appeal were criticised since they conflated independence with efficiency and seemed fixated on moving the Boards to another physical location. The new proposal suffers from all the same defects, but now adds another one - the Boards are not sufficiently self-financing, according to Battistelli and his team.

Actually, Merpel should not have been surprised, because she had heard a whisker whisper that Battistelli had been observed to "note with interest" that the UPC is intended to be self-financing from Court fees, and he clearly had his beady eye on applying a similar idea to his own troublesome Boards of Appeal. He claimed that it was all very well for the Boards to wish for independence when someone else was paying for it, with the clear implication that proper independence means having your own source of funds.

But Merpel did not believe for one moment that the idea that the Boards should pay for themselves would survive any scrutiny. It is clear that the founders of the EPC did not consider that it was in any way appropriate for the Boards to be funded to any significant degree by appeal fees. In fact, that realisation is almost certainly why the compromise on the independence of the Boards in the EPC is the way that it is - they were going to be dependent on the rest of the Office for funding, and so could not be completely administratively independent of it; the EPC tried to achieve the maximum practical autonomy while keeping the inevitable financial link.

Now, to be fair, the current draft proposal for reform does not suggest that the Boards be completely self financing. But it does suggest that the "cost coverage" (ratio of fee income from appeal fees to calculated cost of the Boards of Appeal) be gradually increased from what is apparently 4.2% today to around 25%. This suggests, over time, something like a 5-fold increase in appeal fees. The proposal does of course suggest that the 25% figure could also be contributed to by efficiency improvements in the Boards. While some improvement in throughput of cases could be envisaged, the requirement for 3- or 5- person Boards for appeal cases, plus the serious responsibility that the Boards have that, in the case of a negative determination, they are the final arbiter, suggest to Merpel that any improvements in efficiency are likely to be modest or at the expense of a much reduced quality.

An increase of the appeal fee is suggested in the draft proposal, from the current level of €1880 to €2940 in 2017, and rising to €7350 by 2021.

Merpel thinks that this is completely outrageous.

Firstly, one reason for appeal is that a refusal by the Examining Division is wrong. As examiners are put under greater pressure for productivity, wrong refusals are expected to be more, not less, common. Applicants will be penalised by such a massive fee increase. There is a provision for refund of the appeal fee in the case of a substantial procedural violation, but it is perfectly possible for the examination to be shoddy without amounting to a substantial procedural violation.

Secondly, considering substantial procedural violations, are the Boards now going to be under pressure not to adjudicate that one has taken place, because it will reduce their funding? That would have the complete opposite of the alleged effect, to decrease their independence not increase it.

Thirdly, Merpel has seen no corresponding proposal to decrease other EPO procedural fees to offset the effect. She will be very surprised if one is forthcoming.

The EPO is not funded only by procedural fees. A major portion of its income is renewal fees, both those it charges directly on pending applications, and those that are remitted to it by national offices after grant (50% of the fees paid to those offices). Merpel thinks that she can suggest another, better way to make the funding of the Boards of Appeal less open to political interference from the President - benchmark it at a certain proportion of the renewal fee income. That would tie it, in an indirect way, to the work that the Office was doing, while not making the Boards dependent every year on the President agreeing to their financial requests.

This new focus on the cost coverage of the Boards of Appeal may suggest another reason for the Battistelli obsession to move them out of the Isar building (which they share with him). If they move to different, rented premises, their office costs will be easily identifiable, without giving rise to awkward questions about what the rest of the Isar building may be costing. Incidentally, the draft proposal suggests to juggle staff from PschorrHöfe to Isar, and then rent out some office space in PschorrHöfe. Is now the EPO to be expanding into the office rental business?

The next Administrative Council meeting is at the end of June. Merpel sincerely hopes that this mad proposal will be ditched before then, or rejected by the Administrative Council.

63 comments:

If we went down this line would we not need to change the way in which appeals against ED decisions were handled? That is, would we not need to make the ED party to appeals against their decisions, and allow applicants who win on appeal to recover their costs from the ED?

An applicant who appeals a decision refusing the application generates a massive annuity windfall for the office. For an applcation refused after ten years experiencing a four year appeal procedure, the extra annuity payments which the office receives would be €6,000 odd. Similarly, a proprietor in an opposition appeal against a decision revoking the patent effectively generates cash for the EPO thorugh the national renewal fees. Once these have been factored in, I am sure the 4% figure would rise to around the 25% mark

CA/90/13 (point 31) seems to indicate that the recent increase in appeal fees from €1240 to €1860 would result in a "cost coverage per appeal" of about 6%. Was this found to be overly optimistic or is 4.2% an outdated figure? One assumes that the further increase from €1860 to €1880 did not make much difference. Presumably, neither the 4.2% nor the 6% figures include any renewal fees. This seems unfair since it would seem that a significant portion of those renewal fees result from applications that would be refused (or granted, resulting in shared fees) without the appeal, such that the fees would not reach the office if the appeal was not filed.

I think that Merpel has got this right apart from one glaring error. The increasing productivity demands on examiners are far more likely to lead to an increase in "wrong grants" rather than "wrong refusals." The purpose of the the productivity increases is to raise renewal fee revenue and there are no renewal fees for refusals. The whole system is set up to pressure examiners to grant more patent, so from a production point of view, it is still far easier for an examining division to grant a patent than to refuse it. The German Federal Patents Court and English Patents Courts both revoke the vast majority of hi-tech patents that come before them. Of the ones that survive, it is rare for the claims to survive in the form in which they were granted. That would appear to suggest that the EPO examination is becoming redundant.

My guess would be that in the future, the EPO will be refusing very few patent applications. They may even stop examining (or pretending to examine) them at all. So, let's not worry too much about the BoAs. They will probably redundant if a few years anyway.

As others have commented here, if the Office really wants to fund the Boards differently, then it would seem equitable to credit the Boards with at least a proportion of the renewal fees earned while a case is under appeal.

On the other hand, since the Office is obliged by TRIPS to provide recourse to a court/board of appeal, one could instead say that the Office should just suck it up and pay for what is a necessary running cost (part of the "deal" that it has to grant EP patents).

As far as I understand, presently EPO appeals are funded similarly to a car or health insurance.For example, in case of car insurance, everybody pays a small amount every month to cover a very rare/expensive case of a car accident.

The same, I guess, happens with an EPO appeal fee.

I.e., everybody pays various fees during patent prosecution. In each of those fees, a small percentage (%) is reserved for a relatively rare case of appeal. In this way, a high one-time appeal payment is avoided by paying it in parts with various 'office actions'.

A proposed increase of appeal fees would mean decrease of all other EPO fees, respectively?

The suggestion of a five fold increase to cover the costs strikes me as being spin to hide the real intentions behind the suggestion. Raising the appeal fee to such a punitive level will dissuade parties from filing appeals except in the most important of cases. The net result will be a reduction in workload and a corresponding shrinkage in the BoAs. A punishment, therefore, for having dared to say boo to the President.

For the EPO president, the quality of the search and the examination at the European patent Office is the best of the world. For obscure motivations, a small group of applicants (a minority) is challenging this excellent quality, and are lodging appeals to the BoA.It is logic that such bad behaviour can not be encouraged. A way to improve the system, is to increase the fees of the appeals.

How is it that, at the AC, a large number of the smaller EPC Member States support BB? Does it not remind you of the support Mr Blatter could count on, within FIFA? Could it be that BB (from his palace on the top floor of the Isar building) just like cunning old Seppie, pays these Member States each year an ever-bigger dividend? At the EPO, how might he do that? Here are some possibilities:

2. Hold annuity fee income high by giving Applicants the possibility to defer patent grant more or less for ever. Take care though to provide, for those few who want it, a quick and dirty grant (and the huge burden of multiple national annuities that goes with it).

I do not know why sloppier examination (i.e. more grants) would reduce the number of appeals. It will certainly cause an increase in the number of oppositions and since the number of oppositions is more or less proportional to the number of appeals with an increase of oppositions also the amount of appeals will increase.

It would be illogical (and indeed I agree with Merpel) injust to ncrease the appeal fees to credit the balance of the costs of DG3. If that would be the case also the fee for opposition should be increased in the same way (but I probably should not raise this, because it might give BB some ideas). Anyhow, the idea to only raise the fees for appeals seems to be very biased.

High costs of appeals indeed would seem very harsh in appeals from decisions of the Receiving Section and/or the Examining Division. But how about appeals in disciplinary cases: do our EQE candidates who want to protest about the decisions of the Exam committees need to suffer by paying an appeal fee that they hardly can afford? Or can we see a reduction scheme? Maybe also some reductions for the poor SMEs?

I would suggest to allocate the budget that is needed for the inventor-of-the-year festival (which can easily be discarded with) to DG3. In any case that will already make up for a large part of the current deficit.

It is the attitude of the member states that I do not understand. Inside the Office, almost everybody would agree that we are heading against the wall – and still speeding up. Now I can understand that the President and his friends favor short term profits; most likely, he will not be in charge any more when the bubble bursts. But the member states should have long term interests in maintaining the European patent system (and their most cherished unitary patent, which is built on it) alive. Why would they let the President kill the goose that lays the golden eggs and even applaud? I really do not get it. They are either extremely naive (but normally they are not when their national interest is involved) or strangely apathetic. Even the Albanian representative who hardly knows what a patent looks like must understand that his country will get less money once people realize that a German patent might be better value than a European one, must he not?

Millipede rightly suggests to allocate the budget that is needed for the inventor-of-the-year festival (which can easily be discarded with) to DG3, which would make up for a large part of the current deficit.The same applies to the budgets for media "partnerships", body guards, investigators, "technical" cooperation with members states, "medical care" for AC representatives, incompetent VP´s and secret remuneration of the president and many more. As a result the appeal fee could be dispensed with entirely.

Yes, that's like saying that if the judiciary is funded from general taxation, it's not financially independent and thus not independent, which is nonsense.

The point of the separation of powers is that a judiciary (or, in this case, DG3) has its independence from the executive enshrined in statute (or, in this case, the EPC). The present executive seeks to impose a structural reform which, in some aspects, actually leads to a loss of independence of DG3 with respect to the executive.

Interesting to read today that Frans Timmermans has censured the PiS government in Warsaw for changing the law in such a way as to place the Polish constitutional court subject to the executive. Thus is the separation of powers so easily removed, in a country that claims to be a democracy.

"Yes, that's like saying that if the judiciary is funded from general taxation, it's not financially independent and thus not independent..."

No, it isn't.

"...which is nonsense"

Therefore, it isn't.

Your argument leads to the conclusion that it is irrelevant who pays for an Appeal Board, judge, or sports referee. General taxation is not directly or indirectly under the influence of an Appeal Board.

An appeal fee of 7.350 Euro is insulting. I am surprised that nobody so far mentioned that such a fee is a clear disincentive to file with the EPO in the first place.

For that amount of money, you can get your application translated into French/Dutch, file it as national application, and you get the search report together with an opinion from the EPO. After that, you pick just the two or three countries you are interested in and go there directly. Go for Germany - biggest market, no translation needed for filing and search, France/Netherlands - you already have the application, and Great Britain. That will secure two additional search reports (DE, GB). With some luck you will have a good overview of the relevant prior art. Infringement in Düsseldorf (DE), period. No hassle with EPO appeal fee, UPC, etc. All things considered, you are likely cheaper even without an appeal.

Sure, that strategy is not fit for everybody. As alternative, go EPO for the search, either with an EP or a PCT, and then proceed on national level, again completely sidestepping EPO examination and appeal. Going PCT will also avoid the nasty exchange of search results, making sure that the EPO does a proper search instead of considering mainly the national search report. The EPO did not lower the search fee when that exchange was introduced, although it is supposed to save time.

What is kind of shocking about the proposal to have a self-financed DG3 because of self-financed UPC-courts is that it shows an utter lack of understanding of the function of DG3 and the UPC-courts by BB and his freaks.DG3 is a judicial instance, there to correct/review 1st instance decisions ... such a correction mustn't cost a lot of money for the appelant(in particular SMEs).DG3 should be regarded as a futher liability of the EPO(rg) ... similar to the AC - I do not think that they are self-financing.

As alternative, go EPO for the search, either with an EP or a PCT, and then proceed on national level, again completely sidestepping EPO examination and appeal.

Be careful with France. A direct French regional phase from a PCT filing isn't possible; the application will have to go through the EPO. So you will need a FR either a FR first or second filing. As a bonus, a first filing will give you an EPO Search and opinion. Mais pour ça, il faut rédiger la demande en français.

Let's not talk about the utter idiocy of the "PCTdirect" thing currently peddled by the EPO, where applicants are encouraged to amend their second filing in order to overcome objections of the authority who handled the first filing. If you like endangering your Paris priority and finding new reasons to go all the way to the EBoA, this one's for you...

My suspicion is that through impossibly high work quotas, the EPO examiner will have no other practical option but to rubber stamp whatever is filed, without looking at it too closely, unless he feels suicidal and/or wants to end up a homeless wino sleeping under the bridge. But everything is fine, since the EPO is ISO 9001 certified.

My point was that if you change from a system where the judiciary are paid for by general taxation to one where they are paid for by user fees, you introduce direct financial incentives for the judiciary to make appeal an attractive option (e.g. quick and with a high probability of success)

Even more incentives would be introduced in a system where fees are based on the value of the dispute and the judiciary can decide on what that value is. But of course no one would be crazy enough to introduce such a system.

Sorry, I must stop being sarcastic.

But really the damage being done is not through sarcasm, but through the suggestion of lack of independence.

Can anyone point to a case at the EPO where lack of independence was a serious (as opposed to theoretical) issue?

As Lord Darlington observed, more than a century ago, a cynic is a person who knows the price of everything but the value of nothing.

Do we have more cynics in the world today? I think so. Everywhere one looks (as a patent attorney) one sees Administrative Council members, business people, economists and politicians monetarizing everything, as fast as they can, putting a price on everything, with nary a thought about the value that they are destroying.

But there are a few straws in the wind (politicians take note). In particular, the economists heading up research at the IMF have started to put out Papers that argue that neoliberalism is routinely destroying more value than it creates. It is easy to price everything, very hard to quantify "value". Measuring what you can measure and dismissing any thought about anything else might be excusable in a professor of economics but not for a politician or business person.

So perhaps it's not too late for the AC, first to see the error of BB's Master of Business Administration ways, and second to do their F-ing job, namely exercise some control over their attack dog, and curb the beast. In 40 years since the creation of the European Patent Convention, it has come to be the world's premier (go to) corpus of rational patent law, thanks to DG3 at the EPO. Europe has precious little "soft power" in the world today, but here is a jewel in its soft power crown.

Meanwhile BB, in what seems to be a bizarre and ever-more emotional fit of pique, is bent on wiping it out, regardless of the cost. In my opinion, a disgrace, a tragedy, and deeply lamentable.

"So perhaps it's not too late for the AC, first to see the error of BB's Master of Business Administration ways, and second to do their F-ing job, namely exercise some control over their attack dog, and curb the beast."

Just two quick points.

As far as I was aware, it's not BB who claims to be an MBA but the one who signed off on this.http://www.dziv.hr/files/File/go-izvjesca/godisnje_izvjesce_2010.pdf

Apropos exercising control over the attack dog, haven't you ever heard the old adage "Don't bite the hand that feeds you". The guys to exercise control are the ones in the ministeries. Refer to Article 4a EPC. Long overdue by now.

My clients insist on copy invoices for all my "disbursements". No copy invoice, no payment. They set the hourly rate for each person in my firm who bills out his or her time per minute. And they promptly switch to a different firm if mine doesn't offer good value for money, for every "buck" they pay me enough "bang" to keep them happy. It's a tough competitive world out there, one in which I can survive only if my "bang" has to be bigger and better than yours. If "bang" is like "value", I certainly do know very well not only what "price" means but also what "value" means. My very survival in the profession depends on it

What should really worry the members of the Council is that Battistelli is simply mocking them, not doing anything of what he is told to do. Whatever the reason for his behavior, he is leading the Office in a direction which is not what the Council wants. Eventually, they will have to show him who is the boss or they will have to accept that the power is not in their hands.

If it was true that in the pending disciplinary case concerning a member of the Boards, the EBA has decided that the oral proceedings on 14th of June shall be public, as suggested by Bringbackalib, this would be a quite extraordinary development. It would indicate that the President is actually loosing the control in the campaign he launched against the Boards as a reaction to decision R19/12. Public exposure, shortly before the next meeting of the Administrative Council, of his behavior and of the doubtful actions of his investigative services might turn into a disaster for him. Two previous decisions in this disciplinary case, both favorable to the accused judge, have never been officially published despite express orders of the EBA to this effect. This time the truth will come out and it might be somewhat different from what had been propagated by complacent newspapers. Room 131 might not be large enough to accommodate all those interested, from both inside and outside the EPO.

Well http://www.epo.org/applying/online-services/proceedings/calendar.html? for 14th June does not list the proceedings or indeed any proceedings in 131. Note that proceedings in appeal are public unless particular circumstances dictate otherwise. Could that be the case here?

Had I known before that Ipkat was a malicious source I would have never dared even having a look at it.

Luckily we have our wise president for protecting us. Than you so much!

To be on the safe side I will also destroy my laptop and smartphones at home to prevent any further malicious attack from malnets.

Adieu, naughy Merpel. Adieu Techrights. Adieu FossPatents. Ah, no. Mr Mueller is now accessible again from the EPO: he must then be a nice guy after all. I will read only his posts, but he does not publish since last May. Is it maybe time for a new post on the EPO from a nice guy?

Weirdly enough, I cannot access ipkitten.blogspot.de for the reason mentioned above (malicious/Malnet).ipkitten.blogspot.nl works find..co.uk too.If one knows how Google (and thus blogspot) work, it become obvious that there is no malware automagically detected by the firewall software, but the reason is very fabricated. Well, it works for Munich. DG0 cannot access this site anymore. Nor the AC-members coming to Munich.

Well http://www.epo.org/applying/online-services/proceedings/calendar.html? for 14th June does not list the proceedings or indeed any proceedings in 131. Note that proceedings in appeal are public unless particular circumstances dictate otherwise. Could that be the case here?

Well spotted.

And in the same vein the EPO site does not provide access to the previous decisions in cases Art. 23 1/15 and Art. 23 2/15 - despite the fact that the Enlarged Board determined that they be published.

Who cares as long as Wikipedia is available.https://en.wikipedia.org/wiki/Art_23_1/15_and_Art_23_2/15

Interestingly, in the recent survey conducted by SUEPO, IP blogs are considered as a relevant source of information for 45% of the respondents - far higher than the 9% for Top management and 17% for Internal communications ...

https://suepo.org/documents/43311/54958.pdf

See page 19.

But I'm sure it has nothing to do with the banning of the site within the EPO ...

the hearings next week in the case of the suspended member of the BoA are public and planned to last 3 days - but I am ready to bet with you that as soon as a critical level of interest in them will be reached, despite the attempts of the Office to hide their occurrence, the President will find a good excuse to block access to the public.

Article 12a of the Rules of Procedure of the Enlarged Boards of Appeal, setting the procedure of proceedings under Art 23(1) EPC states:(9) Unless and to the extent that the Enlarged Board decides otherwise, the proceedings shall not be public and shall be confidential.Has the EBA really decided otherwise in this case?

Meldrew,Perhaps a table of number of grants against number of ex-parte appeals may help (or refusals even). Given the increase in productivity, could there be a simpler link - less refusals = less appeals

"Perhaps a table of number of grants against number of ex-parte appeals may help (or refusals even). Given the increase in productivity, could there be a simpler link - less refusals = less appeals".

Not according to EP Bulletin, which shows more refusals in 2015 (4336) than in 2014 (4146), but less than in 2013 (4591). Based on these figures the appeal rate seems to have dropped from 26% in 2013 to 24% in 2014, to 19.9% in 2015.

Of course, it is difficult to say what is the "right" level of appeal, and perhaps the "quality" of refusals has grown so high in the last two years that fewer applicants dare appeal.

Appeal fees do not translate to patent renewal fees, the only fee the Member States receive/keep a share of.Higher appeal fees = less appeals, likely also lees DG3 decissions reversing refusals, ths even less renewal fees for MSs.

Indeed, the public announcement of the oral proceedings in Art. 23 1/16 at the entrance of the Isar building indicates the hearing is public.It is also known room 131 is a very small one! If the EBA as it seems in fact decided to held a public hearing, the administration was again creative in finding way to circumvent the effective presence of the public…

Ah yes, the famous "Hitchhiker's Guide" approach to public proceedings:

M. BATTISTELLI: But, Mr Dent, the notice of the hearing has been available in the EPO for the last week!

ARTHUR DENT (PATENT ATTORNEY): Yes! I went round to find it yesterday afternoon. You’d hadn’t exactly gone out of your way to pull much attention to them have you? I mean, like actually telling anybody or anything.

M. BATTISTELLI: The announcement was on display.

ARTHUR DENT: Ah! And how many members of the public are in the habit of casually dropping around the EPO of an evening?

M. BATTISTELLI: Er – ah!

ARTHUR DENT: It’s not exactly a noted social venue is it? And even if you had popped in on the off chance that some raving bureaucrat wanted to fire a member of the Board of Appeal, the announcement wasn't immediately obvious to the eye, was it?

M. BATTISTELLI: That depends where you were looking.

ARTHUR DENT: I eventually had to go down to the cellar!

M. BATTISTELLI: That’s the public area of the Office.

ARTHUR DENT: With a torch!

M. BATTISTELLI: The lights, had… probably gone.

ARTHUR DENT: So had the stairs!

M. BATTISTELLI: Well you found the notice didn’t you?

ARTHUR DENT: Yes. It was on display in the bottom of a locked filing cabinet, stuck in a disused lavatory with a sign on the door saying “Beware of the Leopard”.

At the end of today´s public oral proceedings in relation to a petition by the AC of the EPO to the Enlarged Board of Appeal to remove a judge from office, the EBA announced1. that its members had received a threatening letter from "an authority which is not a party to the procedure"2. that it had requested the petitioner in its quality of the members´ appointing authority to distance itself from the threats in that letter3. that in its response the petitioner did not adequately distance itself from the received letter4. that the EBK could not in the circumstances pursue the procedure, which accordingly was terminated without the EBA proposing removal from office of the respondent.

According to a source cited by Techrights - always to be taken with a pinch of salt, still Techrights was the first to disclose the threats of Battistelli to the EBA:

"inside sources say that Mr. Battistelli sent a threatening message to the Enlarged Board of Appeal dealing with the case, to the effect that they should not let the public be present during the hearing. The EBA is said to take this very seriously and to have forwarded the president’s threat to the chairman of the Administrative Council.”

Mr. Battistelli sent a threatening message to the Enlarged Board of Appeal

If true, then according to the Guidelines for Investigation, everyone concerned has a DUTY to report Mr. B. to the investigative unit. According to what had been presented as his contract, he is after all submitted to the same staff regulations as every one else...

When Mr. Battistelli leaves service in one way or another, will he be submitted to the whim of his successor before applying to a new job?

And if there is a vacancy at the top, does this mean that no one can leave the EPO anymore?

Why is this blog still silent about the Administrative Council approving the proposed reform last Thursday, with only some relatively minor amendments? This approval is apparently perceived as unbelievable by anybody (except the EPO administration) who dares to express an opinion on the matter.

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